The Mozambican government will grant a State endorsement on the issue of Eurobonds by oil company ENH in order to guarantee its participation in natural gas projects, the Economist Intelligence Unit (EIU) reported.
EIU analysts also said that the continuing crisis of so-called hidden debts will not prevent the granting of a new state guarantee, this time to ensure the participation of that public company in the projects of the Rovuma basin.
State guarantees granted by the former government of President Armando Emílio Guebuza on two loans to two public companies – Mozambique Asset Management and ProIndicus – flouted Mozambican laws.
ENH has a 15% stake in the Area 1 block, led by the Anadarko Petroleum group, and its involvement in the financing of the project is estimated at US$2 billion, which the company intends to raise in international markets.
The EIU writes in its latest report on Mozambique that the project is financially secure, supported by credible oil companies, is transparent and has been approved by the Mozambican parliament.
Mozambique’s economic development is dependent on the start of the exploration of the natural gas reserves in that area of the north of the country, with the EIU predicting that the economy will “continue to drag” in 2019 with a growth rate of 3.7 %, before starting to accelerate from 2020 with 4.9% to reach 7.5% in 2023, the year in which operations are expected to start.
Exports will tend to fall slightly in 2019, as international prices of the two major products that make up the bulk of Mozambique’s exports, aluminum and coal, are expected to decline.
The implementation of State budgets should show deficits over the whole period under review – 2019/2023 – with a maximum of -9.0% of gross domestic product this year and a minimum of -3.7% in 2023.
The inflation rate, in turn, will tend to worsen slightly, with maximum and minimum values of 3.9% in 2020 and a maximum of 5.7% in 2022 and 2023, due, according to the EIU, to the depreciation of the metical against the world’s major currencies.